Israel’s social policy in East Jerusalem has been a little understood component of its overall political strategy of annexation and de-Arabization. Much attention has been given to Israel’s visible policies of land control, settlement, and house demolitions. Yet it is the social policies that impact on the daily lives of almost all Jerusalem Palestinians. Although less flagrant, they are more pervasive and insidious, tying Palestinians who work and live in annexed Jerusalem to Israeli national and municipal institutions while severing Palestinians in unannexed areas of Jerusalem from their residency rights and social entitlements.

This essay examines the special complexities for Palestinians of Israeli social policy in Jerusalem, especially as it has evolved as a means of economic and political control over an occupied population. First, the essay points out how Israeli tax and insurance regulations exploit Palestinian cultural traditions and political circumstances, and views the general impact of Israeli policies on Palestinian residency status, living levels and development. It then focuses on the Jerusalem municipality’s arnona occupancy tax as it applies to Palestinians in annexed East Jerusalem. It traces the gradual application of the tax since 1967, as annexation was secured, and uses municipal statistics and interviews with residents to evaluate current tax assessment, rates, and collection for both residential and commercial spaces. Finally, the essay explores the costs and benefits of the Israeli National Insurance in terms of beneficiaries and non-beneficiaries.

Socio-economic decisions made by Palestinians in Jerusalem can only be understood within the overriding political context of an Israeli government intent on keeping Jerusalem, with as few Palestinian residents as possible. The unique position of Palestinian Jerusalemites vis-à-vis Israeli authorities is an important background to the upcoming final status negotiations. Palestinians have long protested against the arnona, for example, a residence tax they consider to be illegal and symbolic of annexation, as well as exorbitant and uncompensated by a fair share of municipal services. At the same time, they are pressured to produce arnona receipts to the Ministry of Interior and National Insurance Institute as an essential proof of residency.

Does the Israeli municipality further exploit the political circumstances of Palestinians in the city by requiring tax payments, knowing they are used for residency proof by other government bodies, while ignoring the provision of essential services to East Jerusalem? Are exorbitant tax assessments gradually driving residents and businesses out of the main city neighborhoods and beyond the municipal borders where they may no longer meet Israeli conditions of residency? Are protests of the unfair application of such policies interpreted as accepting the normalization of occupation and annexation of East Jerusalem?

While virtually all Palestinian Jerusalemites view the arnona as exploitative, many believe that their payments into the Israeli National insurance system offer acceptable return benefits. Israeli policymakers often suggest that Palestinians enjoy net financial gain from these ties, especially since they make minimum payments, based on their lower wages, and receive large family allowances. Even Palestinians have occasionally supported this assumption. “Probably 95% receive more than they pay,” was how one East Jerusalem lawyer assessed the situation.[1]

However, there is substantial evidence that only a minority of Jerusalem identity card holders are able to claim benefits. A large pool of Palestinians from Jerusalem who live outside of the annexed areas continue to pay insurance and willingly accept substantial losses in unclaimed insurance benefits. If they do not pay the insurance, or if they try to claim benefits, they will unleash an insurance investigation---and risk revoking their Jerusalem residency status. While economic well-being has never been the main cause of struggle for Jerusalem Palestinians, economic pressure certainly influences the population over whether or not to continue to press their claims to a Jerusalem ID. So far Israel has refrained from issuing new identity cards, although it has hinted it will soon. If a “show of presence” is to be required for a new ID, as many as 40% of Palestinians from Jerusalem might immediately lose their “permanent residency” cards.